Finance Minister Enoch Godongwana mounted a somewhat shambolic defence of government’s recent decision to raise a $750-million (R11-billion) loan from the World Bank to support the country’s response to the Covid-19 pandemic.

The Minister logged on late – and initially from his car – to a virtual meeting of the Standing Committee on Finance, convened specifically to discuss the loan and to understand why it had been concluded and under what conditions.

Godongwana then angered several members of the committee further by providing an extremely terse explanation, which lasted about a minute, for the loan decision, before asking committee members whether they had questions.

Several committee members – notably the Economic Freedom Fighters’ Floyd Shivambu, whose letter, calling on the Minister to explain the rationale for the loan, prompted the meeting – described the behaviour of the Minister as disrespectful and disappointing.

Shivambu even urged committee members to issue a statement rejecting the loan, but the proposal did not gain support.

National Treasury officials eventually came to Godongwana’s aid by providing background to the loan, as well as details of its concessional terms relative to those that would have prevailed had the funding been raised on commercial terms.

Director-general Dondo Mogajane confirmed that it was the first time, since 1994, that government had taken up a Development Policy Operation (DPO) loan from the World Bank, having previously opted only for a specific investment loan of $3.75-billion in 2010 to support Eskom’s build programme.

He said the DPO attracted no specific conditions and would be used to support the social relief efforts announced as part of government’s Covid response package; a package that was aligned with the World Bank’s eligibility criteria for the extension of such loans.

The interest rate was 300 basis points below that which could be achieved on the bond markets and there was also a three-year repayment holiday.

Mogajane said the World Bank loan would also comprise only a portion of government’s overall dollar-denominated borrowings for the year, with a further $1.5-billion also raised from the New Development Bank and $3-bilion more to be raised on the bond markets.

The National Treasury’s assets and liability management unit head Dr Duncan Pieterse explained that the loan would, thus, make up R11-billion of the R77.6-billion in dollar-denominated borrowings budgeted for in 2021/22.

Gross borrowings for the year would be R475-billion.

The concessional terms of the loan, Pieterse added, would assist government in lowering its strongly rising debt-servicing costs.

The loan proceeds were being held in the South African Reserve Bank’s foreign exchange account and the funds would be disbursed as and when required to fund dollar-denominated commitments.

Mogajane stressed that the National Treasury was open to other offers of concessional loans “so long as the conditions [of such loans] are not going to impact on the sovereignty of the State”.

“That’s a principled view that we have taken, and the World Bank knows this.

“No-one is going to dictate to us on what the macroeconomic strategy and stance of the country should be [and] we have been jealously guarding that.”

He also argued that, while more reform of the bank was required, the “World Bank of today is different to the World Bank of the 1970s, when structural adjustment policies were the order of the day”.